Q: What is an IRA?

A: IRA stands for Individual Retirement Account. There are several different kinds of IRA with the most common being the traditional IRA and the ROTH IRA. A traditional IRA is tax-deferred, and you contribute to the IRA before taxes are taken out, and then pay the taxes on the money was you withdraw it at retirement age. With a Roth IRA, you contribute money that has already been taxed, but then at retirement age, the funds you withdraw are tax-free.
IRAs are designed to save money for retirement, and there are penalties if you withdraw the money before you reach retirement age of 59 1/2 years old.

Here are tables with contribution limits:

IRA Contribution Limits

Year Maximum Regular IRA Contribution Catch-up Contribution
2002 $3000 $500
2003 $3000 $500
2004 $3000 $500
2005 $4000 $500
2006 $4000 $1000
2007 $4000 $1000
2008 $5000 $1000

Roth IRA Contribution Limits

Year Maximum Regular IRA Contribution Catch-up Contribution
2002 $3000 $500
2003 $3000 $500
2004 $3000 $500
2005 $4000 $500
2006 $4000 $1000
2007 $4000 $1000
2008 $5000 $1000

I hope that answers your question of what is an IRA.